As you may know, any gifts or assets you transfer within 60 months of applying for Medicaid benefits are subject to penalties. This 60-month or 5 year timeframe is what’s called the “look back” period.

These penalties are not calculated in a dollar figure, but rather a set of additional months in which you will be classified as being ineligible for Medicaid, forcing you to use private funds instead, whether those are your funds, your children’s or a benefactors.

Let’s say, for example, you gifted $100,000 to your children four years ago. Because you made that gift within the five-year look back period, Medicaid or in Massachusetts MassHealth will say those funds could have gone toward paying for your nursing care. The agency will then consider the average cost per month of a nursing home in your particular area. In this example, let’s say that cost comes out to be $10,000. Medicaid would divide that $100,000 by the $10,000 figure, which results in 10, meaning a total of 10 months of care you could have received through Medicaid had you not instead decided to give that large gift to your children.

The penalty you receive, then, would be an additional 10 months for which you would not be eligible for Medicaid.

Applying for Medicaid right now might not be your best strategy

Depending on your financial situation and the kinds of payments you made during that 5 year look back period, it might not be in your best interest to apply for Medicaid immediately if you know you’re just going to be subject to a penalty anyway.

This is especially true if you know you’re going to be subject to a very short Medicaid penalty. If you gave away that $100,000 and have only a month before you surpass the five-year lookback window, it is much more sensible to pay the full price of care for a single month and then apply for Medicaid rather than putting yourself into a position where you have to shell out significantly more as a means of getting the care you need.

However, a lot of people who apply for Medicaid or MassHealth for nursing home  do not have a thorough understanding of the basics behind this lookback period or the penalties they could potentially incur, which results in them making some decisions that could severely harm their financial standing and their children’s ability to inherit money from their estate.

For this reason, it’s crucial that you work with a skilled estate and MassHealth Medicaid planning attorney if you expect you will be applying for Medicaid any time soon and are worried about your eligibility. For more information and tips, contact our team at Baker Law Group, P.C. today.